It works a lot like the old method, you click on the “SafeSearch” link on the right of the Google Image search box and select “Report offensive images.” Then a new button named “report” is added to the images. You can then click on the report button to report that image.
Here are screen shots:
Postscript: As of at least November 9th, Google has once again removed this feature from the image search interface. I do not know why at this point.